Industry leaders celebrating the 40th birthday of the 401(k) at the New York Stock Exchange

Reflections on the 401(k): 40 years of progress and a view to the future

Forty years ago, the Revenue Act of 1978 paved the way for the 401(k), ultimately transforming how Americans save for retirement. Although designed to be a supplement to traditional pensions and Social Security benefits, 401(k) plans are now the cornerstone of our retirement system. Some of the latest data shows that they cover more than 65 million workers, represent $4.4 trillion in savings and support upwards of $385 billion each year in retiree needs1. That’s pretty remarkable for a program that had just 7.5 million participants and $92 billion in 19842.

The 401(k)’s impressive history has been shaped by a wide range of factors, including public policy, demographic trends, consumer preferences, the macro environment and changes in the benefits landscape. Numerous plan features, investment solutions and support services have been introduced over the years to encourage greater savings and better outcomes. Innovation has included communication and education programs, call centers, advisory services, online account management and the integration of mobile and digital capabilities.

Today, the 401(k) plan has truly emerged as “America’s Savings Program”—and the industry is at an exciting and pivotal moment. Still, despite its past success, only 53% of workers in smaller businesses have access to a plan3, and 50% of U.S. working-age households risk not having enough savings to maintain their living standards in retirement4. While many Americans have taken advantage of 401(k) benefits, more can be done to better cover, serve and help people save. 

The need for effective retirement solutions that reach people where, when and how they want to be served will continue to drive growth and innovation. For example, the digital frontier, with the ability to leverage technology and data analytics, is enhancing the retirement planning experience. Behavioral science is opening the door to new concepts that could translate into large-scale improvements. The workplace will grow as a gateway to financial wellness, as more employers realize they are a key source for helping families balance retirement savings with their broader financial priorities.

In November 2018, Voya celebrated the 401(k)’s 40th birthday at the New York Stock Exchange. A group of industry and benefits leaders gathered to discuss all that has been accomplished over the past four decades and the exciting opportunities that exist for the future. Building on this strong foundation, the 401(k) is poised to create an even greater impact going forward as it continues to support Americans on their important journey to and through retirement.

1. Department of Labor, Private Pension Plan Bulletin Historical Tables and Graphs 1975-2015 (February 2018), page 25. (Data does not include non-profit and public-sector defined contribution plans). 2. Ibid. 3. Presidential Executive Order, August 31, 2018; smaller firms are those which have <100 workers. 4. Center for Retirement Research at Boston College: National Retirement Risk Index (NRRI) Shows Modest Improvement in 2016.